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tv   [untitled]    January 16, 2013 12:00pm-12:30pm PST

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mayor's office, as well as supervisor chu. before you is a wholesale customer repayment, who purchase about two-thirds of all the water next hetchy system have the opportunity under their contract arrangement with the city to be able to pre-pay capital costs repayment. and these are old capital costs that were incurred previously. monday we sold our own sewer bonds of $19 2 million worth, our wholesale customers as well are able to issue bonds and now experience refunding savings. the approval would include pre-payment and [kphr-ebgs/] agreement, as well as sfpuc tax certificate, very similar to the review when you review our bond approvals for when the sfpuc is an issuer. in this case the issuer would be the wholesale customers not directly the sfpuc. >> and todd, just formality benefit of the public can you
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quickly distinguish who would be our wholesale customers versus retail? >> our whorl sale customers are primarily san mateo, santa clara and alameda counties. they are 26 agencies that provide water to aapproximately 1.5 million people outside of san francisco. inside of san francisco, are our retail customers and our retail customers will also benefit from this, because they will see lower bills than they would have otherwise seen with the capital repayment. the commission approved this back in december. it provides for rate-payer relief in the flare term, specifically in the next 8-10 years for our retail consumers. a total of $362 million and it is permitted under the con trouting agreement that was signed by city and customers in
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2009. this slide is the most important for our retail rate-payers inside the city and the column to the far right shows average monthly bills will be typically $5-8 dollars lower this. is the downstream impact of doing this deal and being able to refund the capital costs for our customers. so it benefits everybody, wholesale customers and also benefits a great deal of the retail customers over the next eight years. >> and todd, these rate increases are a reflection of voter-approved improvements, that is correct? >> that is right. they were planned as part of the $5 billion resip improvements and rebuild of the water system. so we are on track to do that and the majority of those programs would be completed by 2015-2016. the other slides are backup materials that show percentage rate change, as well as how we plan to use the bond proceeds.
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and we're using the bond proceeds consistent with what you have already approved in our capital budget, what you already approved in capital plan. and we're required to use them for eligible expenses under what the irs requires tax exempt bond financing. in addition to that we would use them for some reserves and those reserves basically allow us to have lower rate increases in future years. that is how they flow through the model. the prepavement collection agreement allows foyer surge charge and what will happen the water rate for wholesale customers will go down, but they will levy a surcharge on themselves and they will provide that information to us and we'll be a billing and collection agent. the approval would be before you, consideration and finance today. the board next week, if you concur, and then they would like to go to market in january, january 31st and close at the end of february.
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thank you for your consideration. we very grateful for the budget analyst's report and their thorough review and we agree with their recommendation as well. >> thank you. i had one question. there was a section that budget analyst report highlighted which basically said that the requirement or part of the agreement also indemnifies the puc for costs that may result due to bawsca's erroneous determination of the surge charge that the tax-exempt bonds are taxable unless deemed taxable due to the puc's violation of the certificate. i'm just trying to understand what that means. >> what that means is just like when we sell bonds we're required to use the bond proceeds for eligible uses. so the tax certificate that is before you today says that the sfpuc will provide the best efforts to depend tax-exempt proceeds on capital eligible spending which is why the
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spending plan on one of the slides specifically lays out how we're using tax-exempt bond proceeds. so we follow our best efforts and review those and the city spends the money consistently and the bawsca would members would indemnify us. see its a protection. >> so they would mid-atlantic sure that the surge charges levied are enough to cover? >> that ; is that correct?. all the risks are a burden on them. we have to then use our best efforts to be consistent with the irs regulations just like we do for the $5 billion of bonds that we have outstanding right now. >> okay. why don't we go to the budget analyst's report? >> madame chair, supervisor avalos, on page 8 of our report, we point out that as shown in attachment 1,the
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wholesale customers total principal and interest payments to the ing over the 25-year term. we also point out that although the proposed $362.3 million [prao*-epl/] payment would cause puc to forego future interest earnings, through 2014-2013 [#34*-rbgs/] the wholesale customers have the right to pre-pay the balance owed on capital assets under the existing water supply agreement. plas reed
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recommend [tkwhra-eubgsz/] puc has submitted amended legislation to the committee on page [#1-e6/] our report. first of all we recommend that you approve the resolution for the approval and execution of the wholesale water revenue pre-payment and collection agreement. and we also [r-eplts/] that recommend that you delete line 10 and 11 on line 2 and replace it with "see administrative fund, the fund shall be maintained from july 1 2013 through the termination date of the wholesale water revenue pre-payment and collection agreement." and that you approve the proposed resolution as amended. >> just to clarify, the budget amount recommends amending file 5 with regards to the fund and in addition, it looks like department also submited some language to change for item 6.
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currently it reads that the clerk of board is directed to file a copy of said form of pre-payment agreet with minutes of this motmeting. amended language should read, "the general manager shall submit a copy of the pre-payment agreement for the clerk of the board for inclusion in file 121203 i.e., and that is a request from the department to make amendment. there are two amendments one to item 5 and one to item 6. why don't we open up the item for public comment? anyone wishes to speak to item 5s and 6? seeing none, public comment is closed. okay and so we have got a motion to separate budget analyst's recommendation and the language as read into the record for item 6. we have that motion and do that without objection. on the two underlying items as amended, do we have a motion? >> approve with recommendations. >> we have got a motion to
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send both of those items forward as amended to the full board with recommendation and we'll do that without objection. thank you very much. >> item no. 7, ordinance amending ordinance no. 165-12 annual salary ordinance to reflect the addition of five positions in the office of treasurer and tax collector for the implementation of proposition e and the gross receipts tax. >> would you call item no. 8 as w. item no. 8, ordinance appropriating $1,566,145 from the general fund reserves so to the san francisco department of treasurer/tax collector for gross receipts tax implementation planing for fy2012-2013. >> these two item goes hand in hand. so we have, i believe
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greg cotto from the treasurer/tax collector to present on these two items. >> good afternoon, supervisors. thank you very much for taking up these items. and i did want to, before i get into this presentation, thank the mayor and particularly the mayor's budget office and controller and his economic team, as well as the city attorney's office. president chiu, supervisor farrell and supervisor avalos. i would like to give a brief overviewhoun it changes things fort taxpayer and how the office of treasurer/tax collector interacted with the public.
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the ordinance was passed on november 6th. and it does not apply to the 2013 or prior tax years. and just for your information, tax year is january 1 through december 31. and that affects our payroll expense tax, as well as the new grot gross receipts tax. we will be collecting register fees that affect the '13-14 fiscal year. so if gets collected in advance. payroll expense taxes are over a calendar year and they are filed in arrears, although we do make -- we ask that the taxpayers make quarterly payments. so the changes to the gross receipts tax and payroll expense tax that war mandated by the proposition
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commenced january 1 2014 and the first filing that is affected will be business registration fees are collected on may 31, 2014 and the tax filesing thereafter will be impacted and we'll be providing information specifically about how to fill out your tax forms and such to taxpayers in 2014 to apprise them of these changes and we're also going and talking with the community, even now. some background on the business taxes. they are the second largest city tax that will be approximately $500 million annually at rollout. the businesses that are actually filing and paying taxes under the gross receipts tax versus the payroll expense tax will double and we'll see approximately 20,000 business has we'll interact. where previously only 10,000 were filing and 7,000-8,000 were paying. all businesses will have new
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registration fees and all businesses will have to report to us new information in order for us to establish what the registration fee is. so this is going to impact every single business in san francisco. and for your information, and for the public's information, we have set up a website that provides some of this information. at we have found when we have gotten questions from taxpayers i would say 80-90% of the questions were answered by what is on is this this slide. we have been happy so far with the responses and we'll continue to provide more information as needed. one thing i wanted to indicate that we our office is very proud of is that we have had a very successful initiatives that are ongoing, that have impacted how taxpayers. including moving to online filing. we're currently in the midst of
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adding parking tax to registration payroll expense and transient occupancy tax for online filing and we're also in the midst of implementing a new cashiering system. we'll have our first fully consolidated license bill for all of our collected licenses going live for the march 31 renewal cycle that. is a major impact to those 19,000 licenses in the city. and we have procured a new business tax system called -- [speaker not understood] from thompson rueter. this replaces the system from past.
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>> on the initiatives that are currently in place, are those mostly completed? how do they get impacted by the new rules and changes? >> they have been scope-contracted and the cashiering system is going live in about a month and the new tax system is going live over the course of the year. we'll have to do change orders to them in order to accommodate gross receipts and those will be forthcoming. but the big major scope change is that we do to make a change in order to accommodate the gross receipts tax in our tax system, the grm system. >> that is part of the request? >> that is part of the request. >> so currently, businesss do pay a number of taxes and we as the tax collector have to be able to track this information
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for the business. so they do pay property taxes both secured and unsecured. the payroll expense tax, our transient occupancy tax our hotel tax, utility users, access line, tourism improvement fees if they are hotels. litter abatement for cigarette retailers and police department and fire department, et cetera. all of these taxes will persist as we move into gross receipts. and and so we need to be able to build our systems to accommodate this level of complexity, while adding in our gross receipts tax, and the grm software that we purchased has the ability to accommodate all of these taxes. although we did not purchase the license for property taxes. and as you well know the gross receipts tax is complex.
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>> why is that you didn't do that with the property taxes? >> because that would require us to work with the assessor's office. there is potential down the line for the assessor's office and tax collector's office to work together to purchase the property component of the software. and spoking to the gross receipts tax there are eight different categories. or tax schedules and four progressive rates depending on the type of business activity you engage in. as i mentioned before twice as many businesss will actually be filing and remiting this tax. and they are going to have to report different data points. right now a business simply dells us this is how much payroll tax i have in san francisco and apply the 1.5% rate and then that is how much
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tax they owe. we're now going to have to continue to collect that information, plus what of their receipts was in each of the different categoris? because they can report in different categories and actually required to. and we will have to know much more about them and their payroll expense will need to be reported still for the tax and also in most cases for how they allocate, in san francisco out of san francisco taxes. for the business registration fees currently there are four fees ranging from $25 to $500. depending on your level of payroll expense. and as you may assume, most businesses just pay the $25 registration fee because they don't have payroll expense. but when we move to the new registration fees, starting in 2014, we now move to 13 different levels. rates will go up for every
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single business and they will have to report to us their gross receipts versus their payroll and that is what will actually be determining what they pay. so if you had a business where you had no payroll expense previously, but you were bringing in over $1 million in revenues because you were selling something on ebay or something that got you that amount of money, then you were -- then you will have to pay us a much different amount. that gets determined by your gross receipts rather than your payroll and you may also have the gross receipts tax to pay. speaking to the timeline that we're under, i show you the rest of the filings that are happening for this year. filings and payments i should say. that aren't impacted by gross receipts, but as we move into april and particularly may, of 2014, that is when we're going to have to have all of our systems ready to accept all of the information we're getting
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from the taxpayers pursuant to gross receipts, and also be able to tell them, all right you have told me this information about your gross receipts. so now this is what you owe in the taxes. and really have a place for that to go in our business tax system, the grm software. and also to have all of our rules and regulations set up so that we can actually implement this. so that end we do have the two pieces of legislation before you today. and they do provide for the initial funding and staffing to implement this large shift in how many people and how people -- businesses interact with our office. the filing no. 121197 provides for the five positions, which is about 2.5 fte to commence the implementation of the gross receipts tax. we will be returning to the board threw the rough the
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budget process for additional positions as we move through this process. these are the folks that we knew that we needed to get start today and we'll be adding folks to the process. in addition, with our software expenses i know that certainly is a large number upfront, but this is what allows to us enter into the contract for the scope of work that allows us to get us to our go-live date and allows us to get there to have this tax filing ready. so we need to be able to commit the resources now to these vendors and be able to executive an agreement, so that we can actually get to the 2014 date that. is why we're asking for it right now, so that we can get that going and not have to wait for the budget process coming up later this year. and i also provided a breakdown, but i know that the
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budget analyst's report does a much deeper breakdown and explanation as well. and just to close, before i ask for any questions, we do believe that we have a track record of success in implementation software and customer service enhancements and we think that we are going to be build -- our goal is to build this implementation to best practices rather than as-is. and so we are going -- and to that end we're going to continue to renew, review and ensure that we have the prop er allocation of resources. we'll be returning through the budget process and seek board approval, but we do need to move forward right now for these funds in order to get the process started so we can actually hit our go-live date w. that i will take questions. >> thank you very much. i did have a question. so the
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staffing levels moving forward, do you have any indication of what that might look like yet or is that really going to be part of the budget conversation in what you negotiate between the mayor's office and coming to the board? >> it will have to be part of the budget conversation. what we know is that we're implementing a number of software enhancements. so this is going to certainly be changing the way that people work in our department and gross receipts tax will also be part of that. as we see that need, we'll be returning through the budget process. >> in terms of your staffing, you have the treasurer/tax collector with a ton of different taxes that you currently collect, fees that you currently collect and none of those are necessarily changing. where your big changing is from the payroll to the gross receipts and you have a number of staff that i imagine are currently in the payroll side of the calculation and they
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would continue to provide that service for the time being as we phase out one system to another? as part of your thinking, with staffing levels moving forward, how do you imagine sort of the phasing in and out of one division or purpose to the gross receipts? >> well, for our taxpayer assistance, for our auditors, for your investigations, for our collectors they don't just do payroll or just do parking, but they are really cross-trained across awful our taxes and our needs. we envision that as well for the gross receipts tax. so this information that we collect from the hotel operators, from our parking operators from our licensees is actually going to help us in figuring out and asession what taxes we need to be collecting from the
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different businesss? because the information that we glean from those licenses, permits and other taxes is going to help inform our gross receipts tax. so we envision our gross receipts implementation to be fully integrated within the organization. but it's just going to be that additional level of complexility in now dealing with taxpayers that is going to mandate that we have additional people. >> and then i did have a question as i was taking a look at the positions being requested immediately and not part of the budget process. one of the positions was for a human resource personnel. and so i'm imagining that they are go to be assisting with sort of the budget that is going to be coming forward, with the additional personnel that is going to be requested potentially through the budget. so i'm just wondering currently do you have on-site a dhr staff or do you receive services from dhr? i'm just trying to understand what your structure is currently is for human resource support. >> let me bring up our deputy
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director to talk about that. >> through the chair, we do have a 1244 in existence right now in the office. we are requesting an additional 1244 to deal with what we foresee over the next five years, a lot of the position-based testing that we'll have to do, which most position-based testing, each test is taking upwards of 3-5 months to dot testing and requirements for those. so we want to begin the process to begin hiring the auditors that are necessary for the growth we'll have to do for gross receipts. in addition, the large volume of staff that we'll be bringing on, we need additional human resources to just manage the hr issues pertaining to the number of staff. right now we have not been able
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to sufficiently meet the needs the division. >> would the intention be that they would -- because there is so much demand on the position-based testing and recruitment component you may flex back down to one? >> that is correct. we're looking at several models in the city. one that started with category 18 or three-year appointments and if they are required to become part of the normal regular headcount and dot position-based test. and then we'll be looking at, if we need to, make them permanent positions. in addition, we have positions
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required for gross receipts. >> i had one other question that was for the first item, which is the09 53 director of gross receipts. i just wanted to understand that piece a little bit better, the salary level, salary and fringe level looks very high. so i just wanted to understand why it was that this was the category that was chosen? what that process looked like in order to arrive at that level? it's $246,000 and i'm not sure did it should actually be at that level, but that is what reported in our report. >> 09 53, there is a numerical error in the salary, i will look at that. the values were done through dhr, so i have to go back and look at the exact number. the classification was chosen after looking at several different jurisdictions and looking at their staffing model. so we pegged and looked at what they are sort of leadership position was? what their salary grade was and what
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was comparable within the classification structure? specifically going back to comments, our vision for the organization is to not create a silo entity called gross receipts, but to have somebody come in and to really know about gross receipts from different municipalitis that will foytiate facilitiat the rules and regulations necessary, as well as start looking forward and sort of foreshadowing the issues that we have around ensuring compliance. how do we take the information we have from permits and license and third party taxes? how do we take the information that they are using and file and put that together and say does that make sense in terms of compliance? how do we align that with our audit practices and go back and align it with what they are filing with the irs? so we need someone to architect that piece of work and not do it


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